Nariman Point continues to see sluggish demand for office space, says CBRE South Asia

Nariman Point, the country's first planned central business district in south Mumbai, has continued to witness sluggish demand for office space in the quarter ended March

MUMBAI: Nariman Point, the country's first planned central business district in south Mumbai, has continued to witness sluggish demand for office space in the quarter ended March. The Central Business District including micro markets of Nariman Point, Fort and Cuffe Parade has seen office space absorption of meager 10,000 sq ft during the quarter, said a CBRE South Asia report.

Office rental values in these micro markets have declined 3-4% sequentially in January-March, the report said. In the last few years, Nariman Point is losing its sheen as central business district with rising vacancy levels due to companies preferring to move their offices to other locations like Bandra-Kurla Complex, Lower Parel and Andheri. Rentals have also fallen here from over Rs 300 per sq ft a month in early 2011 to around Rs 250 now.

The micro market of Lower Parel continued to witness increased occupier interest during the quarter from financial companies that are keen on cost effective Grade A options. Around 0.20 million sq ft of Grade A office space was absorbed here during the quarter, a growth of 60% over previous quarter.

"While the rental values have remained stable for the current quarter; vacancy rate is estimated in the range of 27-29%. No new supply addition was witnessed in the micro-markets of Worli and Prabhadevi. Rental values witnessed a marginal decline of 3-4% q-o-q," the report said.

Transaction activity was upbeat in Bandra-Kurla Complex with around 0.18 million sq ft of Grade A office space absorbed here during the quarter. "The existing vacancy pressures and further supply addition (in BKC) during the current quarter have led to a decline in rental value by 3-4% quarter-on-quarter," the report added.

Around 10 million sq ft of new office supply came on-line across major markets in the country During the quarter. Mumbai led project completions, followed by Bangalore and Chennai, representing about 82% of the entire space completed in the country during the quarter.

Office space rentals continued to witness downward pressures across most micro markets as occupier expansion faced cost pressures and consolidation continued to be the key theme, said the CBRE South Asia report.